We're living on borrowed time, made possible only by the fact that the U.S. dollar has been the reserve currency of the world since the Bretton Woods conference of the 1940s, and when that failed, since the petrodollar arrangements of the 1970s.

Today, that reserve status of the U.S. dollar appears to be coming to an end. Nations such as China are dramatically reducing their purchases of U.S. debt, spending down their stores of U.S. dollars before they become far less valuable, and entering into bilateral agreements so that trade will be conducted in currencies other than the dollar. Demand for the dollar is going down while the supply of dollars is on a near vertical climb, exacerbating inflation trends that already exist.

Meanwhile, member of Congress on both sides of the aisle give us non-solutions to out-of-control spending: They've agreed to $39 billion in “spending cuts.” Let's analyze this.

The federal government spends $10 billion per day. They borrow $4 billion of that per day. So their “cut” represents a mere four days worth of spending or 10 days worth of borrowing by the federal government.

As foreign propensity to hold U.S. debt declines, who is left to buy the debt — that $4 billion per day? Answer: The Federal Reserve (the Fed), erroneously called “the lender of last resort.” Where does the Fed get the money to purchase the debt? Here's the magic: With a couple of keystrokes on a computer, the Fed simply creates the money. In exchange for a little piece of paper called a T-Bill, the money is created and put in the government's bank account where it is spent into the economy. Here's the kicker: The T-Bill gets placed on the Fed's books as an asset. After all, the principal and interest of this new creation are now owed to the Fed by the American public, the true lender of last resort.